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By Shane Croucher
Senior Editor
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Futures markets for the U.S. dipped sharply after President Donald Trump unveiled sweeping, double-digit reciprocal tariffs on the U.S.'s trading partners all over the world, amid fears the move would trigger a recession.
Why It Matters
Aside from the broader problems a recession brings, the economic threat posed by tariffs is also a political one for Trump, who accused the Biden administration of badly mishandling the economy while campaigning on improving it.
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Now, 10 weeks into his presidency, Trump's flagship tariffs policy is stoking fears of a recession, and his polling numbers on the economy have been in retreat. If the recession fears bear out, Republicans may struggle to keep their majorities in Congress in next year's midterm elections.
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What To Know
After the domestic market closed on Wednesday, Trump declared a 10 percent baseline tax on imports from all countries and higher tariff rates on dozens of nations that run trade surpluses with the U.S.
The president held up a chart while speaking at the White House, showing the United States would charge a 34 percent tax on imports from China, a 20 percent tax on imports from the European Union and a 32 percent tax on Taiwan.
The future for the S&P 500 dropped 2.9 percent in the aftermath. The Dow Jones Industrial Average future lost 2.2 percent. These falls send an ominous signal of losses that may come when U.S. markets open on Thursday morning.
Trump's tariffs are a substantial knock to global trade, and many of the U.S.'s partners say they will respond with countermeasures, unleashing a trade war that threatens to drag the global economy into a recession.
To Trump, these reciprocal tariffs—which he says are discounted because they are lower than the cost of trade barriers faced by the U.S.—restore fairness in the U.S.'s trading relationships.
The president has said he wants to protect American firms at home and break open world markets that they should have greater access to. He also said tariffs are a tool to force others into better terms with the U.S.
Trump previously announced 25 percent tariffs on auto imports; levies against China, Canada and Mexico; and expanded tariffs on steel and aluminum.
He has also placed tariffs on countries that import oil from Venezuela and plans separate import taxes on pharmaceutical drugs, lumber, copper and computer chips.
What People Are Saying
Announcing the tariffs, President Donald Trump said the U.S. had been "looted, pillaged, raped, plundered" by its trading partners since WWII and that his new policy was a "declaration of economic independence."
"This has gone on for over 50 years," he said. "Taxpayers have been ripped off. But it is not going to happen anymore."
Michael Feroli, JP Morgan's chief U.S. economist said in a note that Trump's widespread tariffs could put the U.S. economy "perilously close to slipping into recession" by driving up inflation and hurting consumer spending.
U.S. Treasury Secretary Scott Bessent warned countries hit with the new tariffs not to retaliate. "I wouldn't try to retaliate," Bessent told Bloomberg Television on Wednesday evening. "As long as you don't retaliate, this is the high end of the number."
Mark Zandi, the chief economist at Moody's Analytics, previously told Newsweek: "The bulk of tariffs are borne by American consumers in the form of higher prices. ... A combination of the tariffs and the retaliation will weigh heavily on the economy, and in many scenarios may push us into a recession."
What Happens Next
All eyes are on the U.S. markets when they open on Thursday morning for the initial reaction to Trump's new tariffs. Sharp early losses for stocks are expected, though trading in recent days suggests those will reverse somewhat during the day.
This article includes reporting by the Associated Press.
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